The National Broadband Network is on its way and legislation supporting the separation of Telstra’s retail arm from its other assets has been tabled. But don’t think the Australian Competition and Consumer Commisison has finished with the Big T just yet.
Yesterday the regulator – prompted by months of complaints from telcos like Internode and iiNet about price cuts by Telstra’s retail division that its wholesale division didn’t match – published an open letter stating that there might be a case for ‘declaration’ of Telstra’s ADSL broadband services. Declaration refers to a process whereby a wholesale product is much more tightly regulated than it otherwise would be.
When asked about the issue, the regulator has in the past repeated its 2008 statement on the issue that “a compelling case has not been made for declaring and regulating third-party access to a wholesale xDSL service”. However, yesterday that view changed.
The regulator’s group general manager of its Communications division, Michael Cosgrave, wrote in the letter that the information currently available suggested that the current complaints warranted further consideration on the matter of whether the relative prices of Telstra’s wholesale and retail ADSL services allowed other ISPs to profitably compete with the giant telco.
In general, the ACCC said it was concerned about three areas:
- The “apparent cycle” whereby details occurred between the time at which Telstra changed its retail pricing and similar changes being reflected in its wholesale pricing
- The ability of and incentive for Telstra to leverage its position as “sole supplier” to discourage the use of competitive infrastructure in CBD and metropolitan areas
- The level and structure of wholesale pricing compared with retail pricing
The regulator also noted that while there had been “aggressive deployment” of competitive ADSL infrastructure in metro areas, the rollouts had been very limited in regional and rural areas.
“Market evidence indicates that expension of the collective footprint of competitive DSLAM (DSL multiplexer) rollouts is slowing, and the deployment of competing facilities in many regional areas remains unlikely,” Cosgrave wrote.
On this and other bases the ACCC is interested in conducting an inquiry into the case for regulating Telstra’s wholesale ADSL service.
However, not everyone agrees that the ACCC’s move is legitimate.
“Part of the reason there hasn’t been much competitive investment in the regions is that the ACCC has held to a policy of de-averaged prices for ULL access, which makes it far more attractive for competitors to focus on the cities than in the bush,” wrote Business Spectator columnist Stephen Bartholomeusz this morning.
Bartholomeusz claimed out that if the ACCC were to declare Telstra’s ADSL services, it would effectively “tear up” the regulator’s assurances – no matter that those could never be absolute – that Telstra’s ADSL services wouldn’t be regulated. It was the regulator’s viewpoint on the matter – and the level of investment certainty it provided – several years ago that led to Telstra rolling out the ADSL2+ infrastructureen-masse to begin with.
A Telstra spokesperson said regulation of wholesale DSL services was “unnecessary”.
“This situation creates uncertainty and risk for companies who want to invest in new services for customers,” they added. “The real problem is not DSL, it is an ACCC pricing approach which advantages competitors serving city customers over those in rural Australia. Our preference, as always, is to deal with our wholesale customers on a commercial basis in what is a highly competitive market.”
On the price squeeze issue, the spokesperson said Telstra’s competitors could provide customers with broadband using “a range of services from us or other providers” – including the line sharing services from Telstra’s Wholesale division for just $2.5 a month.
“If you look at retail price levels healthy margins are available,” they said.
Image credit: Telstra